The order of the Bench was delivered by
Joginder Singh (Judicial Member)- The Revenue is in appeal for the assessment years 2007-08 and 2008-09 against the respective orders of the learned first appellate authority, dated July 6, 2012, and March 6, 2012. For the assessment year 2009-10, the assessee as well as the Revenue is in cross appeal against the impugned order dated July 6, 2012, of the learned first appellate authority, Mumbai.
2. First, we shall take up the appeal of the Revenue for the assessment year 2007-08 (I. T. A. No. 6335/Mum/2012), wherein, the only ground pertains to treating the entrance fee received from its members as capital receipts ignoring that the facilities that are made available to the members are done in the normal course of its business as the assessee is engaged in the business of race course.
2.1. During hearing, Capt. Pradeep S. Arya, learned Departmental representative, advanced arguments which is identical to the ground raised by contending that the income received in the form of entrance fee is revenue in nature. On the other hand, Shri Salil Kapoor along with Shri Sumit Lalchandani and Ananya Kapoor, the learned counsel for the assessee, defended the impugned order by contending that in the earlier years, in the case of the assessee, the entrance fee was accepted as capital and it goes to the balance-sheet as reserved account. It was empathetically asserted that right from the year 1925 onwards, it has been accepted as capital receipt by passing order under section 143(3) of the Act. Our attention was invited to the order of the assessment year 2003-04 passed under section 143(3) of the Act. It was pleaded that even on the principle of consistency, it has to be allowed as capital receipt. Plea was also raised that for the assessment year 2005-06, the appeal was decided ex parte and the amount was not added. It was explained by the learned counsel that for the assessment year 2005-06, the Tribunal sent the matter to the file of the learned Commissioner of Income-tax and the issue taken under section 263 was decided in favour of the assessee treating the amounts as capital receipt. Reliance was placed upon the decision in CIT v. Diners Business Services Pvt. Ltd. [2003] 263 ITR 1 (Bom). The learned counsel explained that entrance fees is only right to use the services of the club. Further, reliance was placed upon the decision in CIT v. Gopal Purohit [2011] 336 ITR 287 (Bom) and CIT v. Excel Industries Ltd. [2013] 358 ITR 295 (SC).
2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is in the business of conducting horse races and also providing hospitality services to its members and their guests. The assessee declared nil income after carry forward losses of Rs. 2,04,85,610. The assessment was completed under section 144 of the Act assessing the income at Rs. 19,75,86,345 on December 29, 2009, after set off of carry forward losses of Rs. 12,22,09,693. The learned Assessing Officer added Rs. 2,92,13,500 (entrance fee) by holding the same as revenue in nature. On appeal, before the learned Commissioner of Income-tax (Appeals), the impugned addition was treated as capital in nature. The Revenue is aggrieved and is in appeal before this Tribunal.
2.3. If the observation made in the assessment order, the conclusion drawn in the impugned order, assertion made by the learned respective counsel and the material facts available on record, if kept in juxtaposition and analysed, there is no dispute to the fact that right from practically the date of incorporation, i.e., 1925 onwards, the entrance fee from the members was treated as capital in nature. As explained by the learned counsel that majority of the orders were passed under section 143(3) of the Act. We have noted the facts of the assessment year 2005-06, the order passed by the learned Commissioner of Income-tax (Appeals), wherein, vide ground No. 2 (page-2 onwards), entrance fee, received from its members held that the one-time entrance fees, received from its members is in the nature of lifetime membership fees, hence, it cannot be treated as annual subscription as the same is collected once in lifetime, therefore, it is a capital receipt. The hon'ble jurisdictional High Court in CIT v. Diners Business Services P. Ltd. [2003] 263 ITR 1 (Bom) held that any sum paid by a member to acquire the rights of a club is a capital receipt. We further note that for the assessment year 2003-04, while framing the assessment under section 143(3) of the Act and also for the assessment year 2001-02, identically the claim of the assessee was allowed. No contrary material was brought to our notice. It is also noted that even the revisional jurisdiction under section 263 was invoked by the Department and, finally, the entrance fees was treated as capital receipt, therefore, we find force in the contention of the assessee.
2.4. If this issue is analysed on the principle of consistency, we note that in earlier years, identically the claim of the assessee was decided in favour of the assessee by accepting the entrance fees as capital receipt, therefore, we are of the view that unless and until contrary facts are brought on record by the Revenue, no U-turn is permissible. The learned Assessing Officer is bound by rule of consistency. The following cases support the case of the assessee :
(i) Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC);
(ii) CIT v. A. R. J. Security Printers [2003] 264 ITR 276 (Delhi);
(iii) CIT v. Neo Poly Pack (P.) Ltd. [2000] 245 ITR 492 (Delhi);
(iv) CWT v. Allied Finance Pvt. Ltd. [2007] 289 ITR 318 (Delhi);
(v) Berger Paints India Ltd. v. CIT [2004] 266 ITR 99 (SC);
(vi) Deputy CIT v. United Vanaspati Ltd. [2005] 275 ITR (AT) 124 (Chandigarh);
(vii) Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219 (SC);
(viii) Union of India v. Satish Panalal Shah [2001] 249 ITR 221 (SC);
(ix) B. F. Varghese (No. 2) v. State of Kerala [1969] 72 ITR 726 (Ker);
(x) CIT v. Narendra Doshi [2002] 254 ITR 606 (SC);
(xi) CIT v. Shivsagar Estate [2002] 257 ITR 59 (SC);
(xii) Pradip Ramanlal Sheth v. Union of India [1993] 204 ITR 866 (Guj);
(xiii) Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC); and
(xiv) Agrawal Warehousing and Leasing Ltd. v. CIT [2002] 257 ITR 235 (MP).
2.5. The sum and substance of the aforesaid judicial pronouncements is that on the basis of the principle of judicial discipline, consistency has to be followed and once in a particular year, if any view is taken, in the absence of any contrary material, no contrary view is to be taken as finality to the litigation is also a principle which has to be followed. Before us, no contrary facts or any adverse material was brought on record by the Revenue, therefore, on the principle of consistency also, the assessee is having a good case in its favour, thus, considering the totality of facts, we find no infirmity in the order of the learned Commissioner of Income-tax (Appeals).
3. Now, we shall take up appeal of the Revenue for the assessment year 2008-09 (I. T. A. No. 4235/Mum/2012), wherein, first ground pertains to entrance fee received from its member. In the light of the foregoing discussion (I. T. A. No. 6335/Mum/2012), we find no infirmity in the order of the learned Commissioner of Income-tax (Appeals), therefore, this issue is decided in favour of the assessee.
4. The next ground pertains to treating the amount of Rs. 10 crores as capital receipt, received from Pegasus Resorts and Hotels Pvt. Ltd. by the assessee, as interest-free deposits as against Revenue receipt ignoring the facts. The learned Departmental representative defended the conclusion arrived at in the assessment order, whereas the learned counsel for the assessee contended that remand report was sought from the Assessing Officer, therefore, there is no infirmity in the conclusion of the learned Commissioner of Income-tax (Appeals). It was contended that it is a capital receipt as the assessee is not in the business of property, therefore, it is capital asset. Our attention was invited to note annexed with the return and the hon'ble High Court invoked the arbitrator clause. Reliance was placed upon the decision in Travancore Rubber and Tea Co. Ltd. v. CIT [2000] 243 ITR 158 (SC) and in CIT v. Saurashtra Cement Limited [2010] 325 ITR 422 (SC).
4.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that as per the agreement dated May 4, 2004, M/s. Pegasus Resorts and Hotels Pvt. Ltd. paid interest-free deposit of Rs. 10 crores to the assessee. The deposit was in addition to interest-free security of deposit of Rs. 125 crores, which was payable by M/s. Pegasus Resorts and Hotels Pvt. Ltd., to the assessee, over next three years had the construction work would have been completed as per the agreement. This total amount of Rs. 125 crores was to be repaid to M/s. Pegasus Resorts and Hotels Pvt. Ltd. only after 40 years in instalments of Rs. 13.50 crores per year from 41st year. It means the assessee was earning interest on this deposit. Over and above this, the assessee was to recover royalty at the rate of 6.25 crores per year, which increase to Rs. 24.57 crores from 41st year. As per paragraph 5.1 of the agreement, the first security deposit of Rs. 10 crores stand forfeited, as liquidity damages if due to any reason, the work related to "new development" is not completed by M/s. Pegasus Resorts and Hotels Pvt. Ltd. Since the new development could not be started due to inability of M/s. Pegasus Resorts and Hotels Pvt. Ltd., the aforesaid amount was forfeited by the assessee. We are of the view that since the amount of Rs. 10 crores was in the nature of deposits, i.e., capital receipts, in the hands of the assessee, the forfeiture of the same cannot change the nature of receipt, therefore, it is capital receipt. The decision in CIT v. R. D. Ramnath Co. [2007] 164 Taxman 317 (Delhi), CIT v. Saurastra Cement Ltd. [2010] 325 ITR 422 (SC) and the ratio laid down in Travancore Rubber and Tea Co. Ltd. v. CIT [2000] 243 ITR 158 (SC) supports the case of the assessee. No contrary facts were brought to our notice by the Revenue, therefore, we affirm the stand of the learned Commissioner of Income-tax (Appeals), thus, this appeal of the Revenue is also dismissed.
5. Now, we shall take up the appeal of the Revenue (I. T. A. No. 6336/Mum/2012) for the assessment year 2009-10, wherein, the only ground raised pertains to entrance fees from its members as capital receipts. We have already decided this issue, in preceding paragraphs of this order, in favour of the assessee, therefore, on the same reasoning, we find no merit in the impugned ground, consequently, the appeal of the Revenue is dismissed.
6. In the cross appeal by the assessee (I. T. A. No. 6455/Mum/2012), assessment year 2009-10, ground number-1 with respect to confirming the addition of Rs. 17,37,280, being annual subscription, received by the assessee, was not pressed by the assessee, therefore, it is dismissed as not pressed.
7. The next ground pertains to confirming the disallowance of Rs. 4,82,028, under section 14A of the Act. The learned counsel for the assessee, did not press this ground, due to smallness of the amount involved by pleading that it may not be considered as precedent for other assessment years. The learned Departmental representative had no objection to the request of the assessee. Considering the totality of facts and the submissions of the assessee, this ground is dismissed as not pressed, being small amount of addition is involved, thus, the appeal of the assessee is dismissed.
Finally, the appeals of the Revenue and that of the assessee are dismissed.
This order was pronounced in the open court in the presence of learned representatives from both sides at the conclusion of the hearing on June 28, 2016.